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Community Solar PV

The primary reason I am writing this blog is because of my interest in the intersection between Global Warming and Politics. One of the things in which I have become interested, relating to this, is community solar power. Since returning to Australia, with the reduction of solar electricity cost to what is referred to as ‘socket parity’ – the same cost at the retail site of the plug as conventional (ie fossil fuel) electricity – it seems obvious to me that Australia should be moving to full-scale solar panel deployment. Meanwhile, Australia has one of the highest carbon footprints per capita, due to our extremely high reliance on coal for electricity.

Currently, according to the government, we have over 1 million homes with solar panels, though private homeowner installations. This number will double, then double again, for sure, but how long each doubling takes will depend a lot on the stability of the industry, something which is substantially influenced by the carbon price and other government initiatives, taxes and charges; understandably, private and public investors don’t like the ground rules changing when they have money on the table. Moreover, there are limits on how many homes can support solar panels, either due to ownership or degree of insolation – the amount of sunlight falling on a surface each day.

Community Solar PV

One of the ways in which a substantial shift towards solar panel installation can be achieved is through community solar projects, of which there are two basic types: Big Solar farms and distributed solar. Funding mechanisms and ‘financial instruments’ for project to investor relations for both approaches are still being developed, in the face of disinterest by Big Banks who dislike all things unfamiliar and therefore of unknown institutional investment requirements and risk.

I’ve pursued the subject of community PV via numerous avenues, finding some leads myself, getting others from the filter of my Facebook contacts, and still other leads from the initial contacts. What has emerged is a very messy picture, the byzantine complexity of which ensures that realising a community PV project is a major undertaking. There are many steps in the process of establishing a community solar project, which are discussed at some length on the EMBARK website; EMBARK is a private, non-government organisation dedicated to breaking down any and all barriers to developing a powerful community energy sector in Australia.

Why Community Solar?

This is really a broader question: why distributed solar at all? There are much-touted Big Solar alternatives, such as concentrating solar thermal, which would retain the traditional hub-and-spoke distribution models. In spite of this, local unfamiliarity with the internationally well-established technology means that Australian power companies are loathe to develop projects without substantial risk abatement – even when there is substantial community support, such as the Repower Port Augusta project, recently shelved probably due to the company involved asking for a lot of money for feasibility studies – and, similarly for reasons of unfamiliarity, banks are also loathe to lend money. Moreover, community PV projects provide people who are not able to house their own panels a means by which to participate in the on-going energy revolution. Currently, though the ABS reports that 30% of properties are rental, according to a report released in June 2012 by the NHSC, approximately 50% of people aged 25-34 do not own their own homes, so a substantial population is represented in this demographic.

Breaking the Electricity Hegemony

The argument for local – distributed – power production from small and medium installations (ie, residential and commercial, not wholesale production), to me, is actually about changing the stance of political parties on the national energy market (NEM). For decades, the NEM has been a game for only the rich and powerful: companies and governments who own the various systems have written the rules to suit themselves, to the detriment of consumers. The degree of difficulty in unraveling how the convoluted system works means that, even to the dedicated, the processes that determine the price paid at the plug by citizens – the ‘levelised cost of electricity,’ LCOE – are virtually impossible to understand. Transparency doesn’t help much when you’re looking at a ball of twine and the regulators – government – previously set distribution standards that have resulted in huge expenses passed on to the retail consumer in order to ‘gold-plate’ the current system, the utility of which depends on the continued use of a hub-and-spoke distribution model. Meanwhile, though coal-generated electricity use is dropping and renewables increasing, placing downward pressure on wholesale costs, whether these savings are passed on is another matter entirely.

So, the obvious way to stop small groups of powerful corporations from gaming the system is to end their various monopolies. By developing both individual and community PV projects, the current model of electricity generation and distribution can be out-moded by a more decentralised system. In such a system, the stake-holders and the share-holders are the same people – are, in fact, actually individual people, rather than faceless corporations or ‘the government.’ The electricity producers will have to adapt, as they are doing elsewhere, by changing their pricing strategies and, most likely, moving from a simple rate to one rate determined by market demand, as the graphs in this article show for the German electricity market.

This means, ultimately, a movement from supply-side price fixing to demand-side price determination, with all the follow-on advantages of personal choice inherent in the latter: people will adjust their energy usage profile to save themselves money. There will be costs for distributed energy production systems – the solar panels – as well as the provision of smart metering and distributed network components, but, ultimately, Australia can do this and go 100% renewable, for as little as 7-10 billion per annum. Ten billion dollars is, coincidentally, the amount of subsidies annually provided to the fossil fuel industry, to keep burning carbon and running out the clock on the time we have to avert climate catastrophe.

Big Solar projects, while an important part of our future NEM, are regrettably unlikely to change the hub-and-spoke model of power distribution and therefore support more of the centralised control that is necessary for corporatism or other forms of institutionalism to flourish. So, in this blog post, I’ll focus on community-based models of PV; I consider these more likely to be able to change the energy supply landscape, through disenfranchising an entrenched energy industry that otherwise has little incentive to change. Here in Australia, where most electricity comes from old, coal-burning power stations, that industry simply has to change if we are to avert climate change disaster in the very near future.

A Simple Challenge; A Decent FiT

The principal challenge that must be met by a community PV project is simple: as an investment, it must give an adequate return or else people will not invest in it. Even the staunchest environmental activist must recognise this requirement: such a project must do better than merely repay its investors. At present, the biggest block to easily realising adequate returns is the lack of a substantive feed-in tariff, or FiT.

In Victoria, the FiT has varied substantially; the most recent Labor government established a 60c/KWh rate in 2009; successive Liberal governments reduced this, first to 25c/KWh in 2010, which was about equivalent to the wholesale price of peak electricity, then to 8c/KWh the next year, though some retailers allow a 6c bonus on top of the latter two basic rates. To put this in perspective, coal-fired power stations, the building costs of which are now fully amortised, currently charge about 6c/KWh, which rises substantially by the time the electricity reaches the domestic user, to about 20% of their total bill, the majority of which is actually distribution costs – poles and wires – which, ironically, are not so necessary in a distributed power production system.

The current cost of new-build, highly efficient fossil fuel plants, at around 11-15c/KWh, is far in excess of what old coal plants can charge and, absent any government regulation on emissions – such as President Obama is using in the US to increase the expense of new and, more recently, old coal-fired power stations – the 8c/KWh state-mandated FiT is simply both unfair and unrepresentative of the savings conferred by electricity production that is local to the point of consumption.

Unstable Rules Mean Less Investment

The kind of instability created by changing rules, renewable energy targets, carbon prices and feed-in tariffs is exactly the sort of thing that makes investors – both private and corporate – very wary of putting money down on projects. Moreover, with a 2 or more year incubation period before their investment starts paying off, short-term pay-off investors, which include large retailers like supermarkets, are simply not interested. In a long and substantive discussion paper, Woolworths identified lack of a government commitment to a feed-in tariff as the single main reason that it had not committed more of its substantial retail roof space to medium-scale solar PV projects. Persuading large, corporate distribution companies to offer a better rate than this, however, requires leverage that few small, community-based organisations have. Acquiring this leverage would require, at the least, a negotiating position that has buying power.

In the jargon of the energy business, arrangements for buying and selling power come in the form of “power purchase agreements,” or PPAs. These agreements are one of the things that community PV projects need, to guarantee a buyer for the electricity they produce at a set rate. It’s all about ensuring the future unfolds as planned, really, which, as individuals know, is a bit of a crap shoot at the best of times. In the meanwhile, as the dice tumble and fall, we invest ourselves in plans that predicate a certain outcome. Developing PPAs with local consumers is one of the major goals of any community solar PV project.

Completing the First Community PV Project

So far, from what I’ve read or heard, the Community Solar project closest to completion is the South Melbourne Market project, which is being organised by the group Locals into Victoria’s Environment, LIVE. This has been on-going for some time and has more time to go, with an expected date to come on-grid later this year. The main organiser – project manager – for the effort, Mr David Robinson, recently released the feasibility report for the project, which was an important milestone, but the project is yet to start installing panels.

This is certainly not the only green electricity project on the map – literally; the federal government has a map that is searchable for renewable energy and related green projects, though it is probably not comprehensive as it only shows those efforts in which the government is already financially involved. Among these would be the recently announced large-scale solar plants in NSW, the largest of their kind in Australia, which have been mostly financed by state and federal governments at the behest of AGL. The potential for contribution of energy to mining operations should not be overlooked; miners are also looking to solar power, both here and elsewhere, due to the expense of grid access.

The Most Significant Barrier

Just as the most important criteria for justifying a Solar PV Project is economic, the biggest barrier to getting a project started is funding for personnel to work on the project development. Access to funding is either difficult to find – where to start looking – or simply absent. As Adam Blakester, Director, Starfish Enterpises, Coordinator of Farming the Sun, puts it: “The most significant barrier to more successful community energy projects is greater access to funding for the initial project development costs. This covers the critical stages of work before the community is able to invest their own funds.” One place from which such funds could come, of course, is the government.

From Renew Economy recently came the better news that some Community Owned Renewable Energy (CORE) Projects are being funded at the state level, at least in NSW; Robyn Parker, MP (Lib), has announced $411,000 in funding for CORE Wind and Solar projects in that state. I have been unable to find similar stories of similar funding in other Australian states, but keep an eye on the FB group CORENA for updates. CORENA uses a different model, not dependent on investment return, to create projects through donations that then get recycled into buying more solar panels as the initial projects start generating income. Also further to that end, Fund Community Energy has a petition for Federal seed funding, in which they claim that $50 million would unlock $500 million of community funds for 170 projects in the coming 6 years.

Meanwhile, the Australian Renewable Energy Agency (ARENA), has $3 billion to invest in renewable energy projects in the 2012-22 decade, some part of which should be available to local communities, but their website is not clear on this matter; none of the solar projects listed as supported by ARENA are community-based, but industry, industry-association and government research bodies. Mr Robinson of LIVE has told me that even a mere $20K would go a long way to assisting the South Melbourne Market project to move forward. Much of ARENA’s funding, however, seems to be targeted at R&D, rather than roll-out, though there are some provisions in their mandate that could cover community PV projects (see addendum 2, below).

Local Government Options

Meanwhile, also on the local government side, while speaking recently with Ms Romney Bishop of the Nillumbik Shire Council, that council’s Sustainability Officer, I learned that there are multiple groups of councils involved in alliances to combat climate change: Nillumbik is one of nine councils in the Northern Alliance for Greenhouse Action, NAGA; there are equivalent groups around the greater Melbourne area: WAGA, SECCA, EAGA.

The Nillumbik council has recently completed a solar hot-water roll out for council-owned buildings and are now looking at a similar project for solar PV. From Ms Bishop I learned something of the complexity of the energy sector, from a council viewpoint; to obtain a PPA, the councils of the alliance would have to negotiate with numerous distributors and retailers, as the geographical areas serviced by council and energy companies overlap, but are not fully concordant.

Costs of Solar PV Plummeting

The other side of the equation, of course, is the cost of installing solar PV. Solar panels have come down in cost by 80% since 2008 – due to demand driven substantially by Germany’s nation-wide commitment to solar PV, (yeah, even sun-drenched Germany is doing community and residential PV in a big way, with many lessons to be learned), as well as investment by other nations – and, with China, Japan, Chile, Peru, UAE and Saudi Arabia recently committing to substantial solar PV investments, more reductions in module price can be reasonably expected. While this alone will improve the rate of return on investments, a substantial proportion of the cost of establishing a private PV project is installation costs – around 50%, in fact, with module cost the other half – albeit with large local variations. Governments are also working towards reducing the so-called ‘green-tape’ that slows down private installation approvals, such as in the US, but as with any first-time achievement, the first community solar PV projects will face a slew of issues, both technical and administrative.

Electricity Generation and Global Warming

How all this relates to Global Warming is simple: in Australia, the overwhelming majority of electricity is produced from fossil fuels – approximately 97% in Victoria – and, so long as aging, highly polluting coal-fired generators are able to be profitable, due to a lack of a carbon price that properly reflects their social cost, this will continue. By promoting and adopting a distributed energy production system, these dinosaurs of the last millennium will be driven to their necessary extinction and the way to renewable energy will be ensured.

However, with a change of government in the offing, substantial damage could be done to the carbon price by either an LNP or an unfettered middle-right Labor party, much of which price was due to the conditions the Greens imposed on that government. Already, Rudd is heralding a move to an ETS, which would further reduce the price of carbon from $12 AUD of the 2013 budget, itself a reduction on the original $23 AUD, down to ~$6: far below what a US government agency set for the ‘social cost’ of carbon at over $40 USD. Meanwhile, Abbott has an even worse agenda for the carbon price and renewable energy in general, preferring – predictably – to subsidise businesses rather than to put control of consumption in the hands of consumers.

In Summary

I am certain that Australian home-owners will continue to move towards individual energy independence, as solar modules and installation costs continue to fall, thus sparing themselves the certainty of future price rises for energy. Therefore, for the greatest benefit of the greatest number of people, regarding the national electricity market, Australia needs a standard feed-in tariff that reflects the savings of local electricity generation. This will accelerate the development of community power projects, which will ensure that a more substantial population of people can participate in the on-going energy revolution. We also need transparent methods for applying for government funding for community projects, to ameliorate the expenses of initial feasibility studies.

In addendum:
1) I have a collection of curated relating to this subject articles here on ScoopIt!
2) A recent reply to an enquiry I sent to ARENA indecates that there are Federal funds available for community PV projects, for which the PDF describing the provisions under the Measures stream can be found here, within which Appendix A is pertinent.